Sprint has gotten the very clear message from telecom regulators that they do not like the idea of a T-Mobile-Sprint merger. Andrew Dowell reports on MoneyBeat. Photo: Getty Images.

Sprint Chairman
Masayoshi Son
and Chief Executive
Dan Hesse,
who met with officials at the Justice Department and the Federal Communications Commission in Washington in recent weeks, always knew a deal would be a tough sell, the people said. But the men were surprised by the level of opposition and its very public nature, one of the people said.

The sides are now letting the message sink in, the people said. Mr. Son may yet pursue a deal, they added, believing Sprint's U.S. options are limited if the country's third-largest carrier doesn't get bigger. But if the sides do decide to go ahead, they could take weeks or more to ponder strategy and perfect their regulatory arguments, two of the people said.

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Sprint and T-Mobile, 67% of which is owned by
Deutsche Telekom AG
, have argued that their companies should be allowed to merge to create more robust competition for market leaders Verizon Wireless and
AT&T Inc.
The Justice Department and the FCC repeatedly have indicated that the U.S. market is more competitive because there are four national carriers in the wake of their decision to block AT&T's $39 billion deal for T-Mobile in 2011. But Sprint and T-Mobile had hoped authorities would view their tie-up differently.

Mr. Son is chief executive of
SoftBank Corp.
, the Japanese company that bought control of Sprint last year. He and Mr. Hesse met last Monday with
Tom Wheeler,
who heads the FCC, the nation's top telecommunications regulator. In January, the executives met with officials from the Justice Department's Antitrust Division.

The Justice Department and the FCC declined to comment.

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In both meetings, government officials expressed skepticism that further consolidation would be allowed.
Bill Baer,
head of the Justice Department's Antitrust Division, also took his concerns public in an interview with the New York Times and reiterated a general wariness toward wireless consolidation in a speech to the New York State Bar Association.

"The signaling value of the past two weeks has been unusually rich,"
Craig Moffett,
a senior analyst at MoffettNathanson, wrote in a research note last week. "The Justice Department and the FCC have signaled not only that a deal can't get done but that they don't want to see one attempted."

Mr. Son is eager to make a deal happen but has indicated he won't move forward if it is outright impossible, the people said.

SoftBank and Sprint each report earnings this week, and investors will be looking for signals about their plans. The prospect of a deal had sharply boosted Sprint and T-Mobile's share prices, but they have fallen in light of regulators' opposition.

T-Mobile's turn over the past year from a perennial loser shedding customers to the main carriers and into a fierce competitor has made a deal a tougher sell.

A key argument against that belief is that T-Mobile's gains are temporary and that the company and Sprint eventually will succumb to the market leaders' greater scale and financial firepower, some of the people familiar with the matter said.

AT&T and Verizon Wireless have more than two-thirds of the U.S. industry's customers and take in nearly all of its profits. Without additional scale, it would be hard for T-Mobile and Sprint to build high-speed wireless networks that can compete. in some places against cable broadband, people familiar with the argument said. That also is why a Sprint and T-Mobile merger effectively would expand the industry to three real competitors from two, the people said, rather than shrink it from four to three.